– The dollar held near a one-month high against a basket of currencies on Wednesday as investors tried to ascertain if the Federal Reserve might alter the language on its stimulus following a recent jump in U.S. inflation.
– U.S. retail sales dropped more than expected in May but sales in April were revised sharply up and were way above their pre-pandemic level. Separate data showed wholesale price inflation accelerated to 6.6%, the largest gain since November 2010 which reinforced the perception of a strong recovery in the economy.
– The euro stood at 1.2126, little changed on the day but struggling to recover from its fall last week after the ECB pledged to keep stimulus steady over the summer. The British pound hit a one-month low of 1.4035 on Tuesday despite stronger-than-expected employment data.
– The yen was flat at 110.08 yen per dollar, near its two-month low of 110.325 touched earlier this month, with the BOJ expected to extend some of its pandemic relief measures this week. The Aussie dollar lacked traction after the country’s central bank signalled on Tuesday its willingness to extend its bond purchase programme next month.
– Gold held near the lowest level in four weeks after its retreat from an almost five-month high as investors awaited the conclusion of the Federal Reserve’s two-day meeting for clues on monetary policy.
Chart Focus USD/JPY
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 109.90. Stop at 109.70 and profit target at 110.30
3. An increase in US 10-year Treasury yield and strong US data are both aiding the US dollar.
4. A strong price support coupled with bullish MACD are both hinting of a bullish price trend,
1. US dollar is likely to benefit from 10-year Treasury yield climbs back above 1.50%
2. Strong US data reinforced the perception of a strong recovery in the US economy aiding the US dollar
1. Price is likely to be supported by a previous resistance turned support line together with the 20EMA.
2. MACD remains bullish and hinting of a bullish price trend.
USD/CNH – We had a buy call yesterday at 6.4010 which was filled this morning when price dropped to a low of 6.3977. Our bullish view remains unchanged. MACD remains bullish and is hinting of a bullish price trend. However, Stochastic is still declining and has not yet reached the oversold zone, hinting there could be more downside ahead. We recommend keeping stop at 6.3890 and profit target at 6.4390
EUR/USD – Price managed to hold above support at 1.2090 and move higher above 1.21. We think price is likely to be capped at the 20EMA resistance at 1.2140. From here we may see another decline to 1.2050. A move above 1.2170 would negate our bearish view. MACD remains bearish and is hinting of a bearish price trend ahead. However, Stochastic is rising and hinting of a bullish price trend.
GBP/USD – Price broke the support at 1.4070 to move to a low of 1.4034. A strong bounce has seen price rallied to almost 1.4100 where the 20EMA is residing. We think price is likely to be capped by this 20EMA and another decline to 1.4005 is likely within the next 24 hours. MACD remains bearish but Stochastic is still rising and hinting of a bullish price trend ahead.
XAU/USD – Price broke below the support at $1854.70 and reached a low of $1844.50 Monday. A quick bounce has seen price risen to $1865. We think the decline may be capped at $1874.20 and from there we may see a decline to $1844.50 again. Stochastic is rising from the oversold zone but MACD remains bearish. However, MACD may be forming a divergence, warning of a potential low in the making.
AUD/USD – Price reached a low of 0.7673 overnight but this low was accompanied by divergence from the MACD indicator, which is a hint of a potential low in the making. Stochastic is rising and MACD could turn bullish soon. 20EMA is flat and is neutral at the moment. If price can hold above 0.7670, we are likely to see a test of 0.7725 in the next couple of days.